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Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing

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  • Stephen J. Anderson
  • David McKenzie

Abstract

Many small firms lack the finance and marketing skills needed for growth. A standard approach is to train the entrepreneur in these skills. However, rather than requiring entrepreneurs to learn everything, an alternative is to move beyond the boundary of the entrepreneur and link firms to these skills in a marketplace through insourcing workers or outsourcing tasks to professionals. We conducted a randomized experiment in Nigeria to test the relative effectiveness of these different approaches in improving business practices. Insourcing and outsourcing both dominate business training and do at least as well as business consulting at half the cost.

Suggested Citation

  • Stephen J. Anderson & David McKenzie, 2022. "Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing," Journal of Political Economy, University of Chicago Press, vol. 130(1), pages 157-209.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/717044
    DOI: 10.1086/717044
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    Cited by:

    1. Francesco Manaresi & Alessandro Palma & Luca Salvatici & Vincenzo Scrutinio, 2022. "Managerial input and firm performance. Evidence from a policy experiment," CEP Discussion Papers dp1871, Centre for Economic Performance, LSE.
    2. Islam, Asadul & Lee, Wang-Sheng & Triyana, Margaret & Xia, Xing, 2023. "Improving Health and Safety in the Informal Sector: Evidence from a Randomized Trial in Bangladesh," IZA Discussion Papers 16150, Institute of Labor Economics (IZA).
    3. Rodríguez-Lesmes, Paul & Gutierrez, Luis H. & Urueña-Mejia, Juan Carlos & Ortiz, Andres & Medina Rojas, Ivan & Romero, Mauricio, 2023. "The role of local promoters in helping microentrepreneurs engage in digital business training. The case of Expertienda," Documentos de Trabajo 20902, Universidad del Rosario.
    4. Davies, Elwyn & Deffebach, Peter & Iacovone, Leonardo & McKenzie, David, 2024. "Training microentrepreneurs over Zoom: Experimental evidence from Mexico," Journal of Development Economics, Elsevier, vol. 167(C).
    5. Grimm, Michael & Soubeiga, Sidiki & Weber, Michael, 2024. "Supporting small firms in a fragile context: Comparing matching and cash grants in Burkina Faso," Journal of Development Economics, Elsevier, vol. 171(C).
    6. Diego Javier Ubfal, 2023. "What Works in Supporting Women-led Businesses?," World Bank Publications - Reports 38564, The World Bank Group.
    7. Anderson,Stephen J. & Mckenzie,David J., 2021. "What Prevents More Small Firms from Using Professional Business Services ? An Information and Quality-Rating Experiment in Nigeria," Policy Research Working Paper Series 9614, The World Bank.
    8. Evan Borkum & Paolo Abarcar & Laura Meyer & Matthew Spitzer, "undated". "Jordan Refugee Livelihoods Development Impact Bond Evaluation Framework," Mathematica Policy Research Reports 602dafe521fe4467854dcd45e, Mathematica Policy Research.
    9. Otis, Nicholas G. & Clarke, Rowan Philip & Delecourt, Solene & Holtz, David & Koning, Rembrand, 2023. "The Uneven Impact of Generative AI on Entrepreneurial Performance," OSF Preprints hdjpk, Center for Open Science.
    10. Cusolito, Ana P. & Darova, Ornella & McKenzie, David, 2023. "Capacity building as a route to export market expansion: A six-country experiment in the Western Balkans," Journal of International Economics, Elsevier, vol. 144(C).
    11. Muhammd Istan, 2024. "Analysis of the Influence of Assets Structure, Earning Volatility, and Financial Flexibility on Capital Structure and Corporate Performance in Manufacturing Sector Companies on the IDX," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 49-65.
    12. Bruhn,Miriam & Piza,Caio, 2022. "Missing Information : Why Don’t More Firms Seek Out Business Advice ?," Policy Research Working Paper Series 10183, The World Bank.
    13. Pankaj C. Patel, 2024. "Out of the frying pan into the fire: displaced workers’ vocational skill specificity, self-employment, and income," Small Business Economics, Springer, vol. 63(3), pages 1197-1223, October.
    14. Beber, Bernd & Lakemann, Tabea & Schnars, Regina & Lay, Jann, 2024. "Employment effects of skills trainings in Sub-Saharan Africa: A systematic review of recent randomized controlled trials," Ruhr Economic Papers 1080, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    15. Dammert, Ana C. & Nansamba, Aisha, 2023. "Skills training and business outcomes: Experimental evidence from Liberia," World Development, Elsevier, vol. 162(C).
    16. Kaul, Rupali & Anderson, Stephen J. & Chintagunta, Pradeep K. & Vilcassim, Naufel, 2025. "Call me maybe: does customer feedback seeking impact nonsolicited customers?," LSE Research Online Documents on Economics 125615, London School of Economics and Political Science, LSE Library.
    17. Juan Carlos Urueña-Mejía & Luis H. Gutierrez & Paul Rodríguez-Lesmes, 2023. "Financial inclusion and business practices of microbusiness in Colombia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 465-494, June.
    18. Liu, Xinyan & Xu, Yunjiao & Zou, Jian, 2024. "Migration barrier relaxation and entrepreneurship: Evidence from the hukou reform in China," Labour Economics, Elsevier, vol. 90(C).
    19. Mckenzie,David J., 2020. "Small Business Training to Improve Management Practices in Developing Countries: Reassessingthe Evidence for 'Training Doesn’t Work'," Policy Research Working Paper Series 9408, The World Bank.

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